My radically simple approach to finances is a result of simple living. I spend maybe 1-2 hours a month thinking about money and finances. - I don’t budget. - I don’t use spreadsheets or finance apps. - I don’t have any credit cards, loans, or debt. I don’t care about my credit score because I’m not ever going to get a car loan, electronics lease, or mortgage. - I don’t own a car. If I did I would buy it with cash and…
Ask HN: What is your financial “setup”?
121–130 of 146 posts
Re: Ask HN: What is your financial “setup”?
#122Earlier quoted context omitted.
You invested in other people's future. That doesn't seem like a bad thing, and it seems like you could afford to do it. Don't beat yourself up over not having a lot of money in the bank, it seems like you've still got your financial life mostly in order. I often have to remind myself of this, as I send a significant amount of money to another country to help my spouse's family -- It's a significant amount for me, but…
> it seems like you could afford to do it They have a negative net worth. They could not afford to do it.
While perhaps pedantically true, he just said he’s got RSUs and certainly he’s got a 401k and probably other savings if he’s making 300k a year.
You could look at my bank balance and make the claim that I’m “negative net worth” too, but it wouldn’t be accurate because that bank balance doesn’t tell the whole story.
Re: Ask HN: What is your financial “setup”?
#123Earlier quoted context omitted.
I don’t use IRAs mainly because they aren’t liquid. I can’t withdraw without a penalty. An IRA is not necessarily tax advantageous because gains are taxed as income when withdrawn, which is higher than capital gains. The choice to use IRAs is not straightforward. It's also hard to plan for any of this because tax rates can and do change. Capital gains and income tax rates may change, so I generally prefer to pay taxe…
> I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives. Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income. They're not mutually exclusive. My approach lar…
Tax deferring doesn’t necessarily equate to reduced taxes. IRAs just mean paying taxes later, at an unknown rate.
All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me if I’m wrong. That’s assuming income tax isn’t higher in the future, which is quite a gamble as historically income tax has been going up, and historically there’s just been more and more taxes.
Don’t forget that deductions for contributions don’t matter, because you will pay income tax on that principle when you withdraw. If tax rates increase, the tax cost of deferring could be even worse. It really depends on if you’re going to be earning income when you withdraw and how much is going to be withdrawn. It’s complicated and practically impossible to estimate total final tax obligations at retirement. IRAs are not a cut and dry “just put money in an IRA” decision.
Another problem with IRAs is the lockup. If you withdraw before retirement there’s a hefty 10% penalty unless it’s for a mortgage or health insurance.
Re: Ask HN: What is your financial “setup”?
#124Earlier quoted context omitted.
> I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives. Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income. They're not mutually exclusive. My approach lar…
Tax deferring doesn’t necessarily equate to reduced taxes. IRAs just mean paying taxes later, at an unknown rate. All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me…
You can also do a Roth IRA which allows you to pay tax on it now.
Re: Ask HN: What is your financial “setup”?
#125Earlier quoted context omitted.
> I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives. Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income. They're not mutually exclusive. My approach lar…
Tax deferring doesn’t necessarily equate to reduced taxes. IRAs just mean paying taxes later, at an unknown rate. All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me…
Aren't you ignoring the advantage of being able to invest the money you would have paid in taxes for the entire time you've left it all in the tax-deferred account?
I don't get why you're assuming you'll have to withdraw the money prematurely and incur the penalty. That's a rather pessimistic attitude, and it's not like you'd be putting all of your investment funds down this path.
Re: Ask HN: What is your financial “setup”?
#126If you want to budget things your own way in a spreadsheet, check out BudgetSheet: https://www.budgetsheet.net/
It imports all your transactions into a Google Sheet via Plaid, and it's free to try out with a single account linked.
Disclaimer: I made BudgetSheet.
Re: Ask HN: What is your financial “setup”?
#127what has worked for me is in all the different businesses I do, all that comes out of it, the profit, gets invested into real estate. banks and mutual funds offer 8% returns, however at least the way I invest I get about 100% return on my money every year for every dollar invested. I look for houses that are not for sale and negotiate with the owners and I usually buy houses for 1/5th to 1/3rd of what they are worth. Then I split them up and rent the rooms similar to like house hacking, but on a larger scale. I have managers collect the money and put it into the bank every week and so Im not that involved in it, its a long term investment. Then i refinance the house for what its worth and use the cash to buy more similar properties. I look at property as a good way to invest money that you have aquired, similar to a savings account, but the investment grows and you eventually can use the profit from your real estate rentals to buy more property, i.e. it runs by itself. For example, last year I paid $50k for a 6000sqft commercial building that was going to be torn down, I negotiated the price with the owner based on the vacant land value, and then after a construction permit was opened on it the building is no longer going to be torn down, then i refinanced it a year later for 400k which is what it was worth, and the rental income on this property alone is 15 bedrooms times 160/week or $9600/month, which paid back my initial investment in less than a year but i also got the refinance money...
Re: Ask HN: What is your financial “setup”?
#128I don't think there is a "the setup" that universally works for everyone. As much as product makers would like to believe there solution works for everyone, it depends on their circumstances. I have to be brief to make the train but here are some tools (US Focus):
1) Are you trying to get in control? This is where you are constantly living paycheck to paycheck, and bouncing checks. Than I would do the following a) Get in the habit of saving where it is painful to spend. So start putting any percentage of money into a 401k if your company offers it. Ideally target to get the maximum match. But whatever you do start. b) Start documenting all, let me re-iterate, ALL your spending big and small. I recommend Quicken, but an Excel spreadsheet, google sheet works as well. The act of becoming conscious of your spending makes you reflective.
2) You are in control and saving a little bit and bonus you pay your credit card balance in full each month. Here the goal is becoming more optimized (I didn't say optimized). a) Choose a bank that tracks your spending and look at it and automatically pays bills. b) Start putting away money in something like wealthfront or betterment (I prefer the latter). Put it in a 401k or tax deferred vehicle to start since it will reduce your taxes. c) work on eliminating leakage (services you don't use, unnecessary fees etc).
2) You are in control, think more in terms of building wealth. a) Start thinking in terms of applying savings to appreciating assets (homes and eventually second properties for cash flow). Zillow and Redfin allow you to understand the market. b) Look at becoming more aggressive with investments. Look at a percentage to go to growth or dividend funds. But look for a goal of secondary sources of income. Both Schwab and TDA have good platforms to see this.
jonahbenton is right, there is no set it and forget it, but there is get the max out of the time you do when you have to look at it. You have to reconcile, with so much digital theft it is easy to have funds leak because of fraud.
If you are truly looking for a set and forget, get adopted by a wealthy person who will set up a trust fund for you, but full all others, internalize good money habits.
Re: Ask HN: What is your financial “setup”?
#129I really like Beancount with Fava for analyzing my spendings: https://github.com/beancount/fava/blob/master/README.rst
I have been starting on the road to putting all of my transactions into beancount, pulled ofx data for chase and scraped pdfs for another bank account.
The idea of keeping records of everything is satisfying, but still need to do it.
Could you give me some details about how you started? I've glossed over the docs once, but hopefully I can just import everything, name it properly, and view it on Fava.
Is it possible to automatically generate tax documents?
Re: Ask HN: What is your financial “setup”?
#130Earlier quoted context omitted.
> 3. Max out 401k and IRA every year using automatic deductions from your paycheck/bank account. > Pros: saving/investing on autopilot; lower taxable income Does it ever make sense to do Roth 401k instead of traditional 401k?
If you are expecting to be in a higher tax bracket in retirement (counting traditional IRA/401K income) then Roth IRA/401K may be a better choice, since it is after tax when invested but tax-free when withdrawn. Most workers will have substantially higher income subject to income tax during working years than in retirement even with IRA/401K withdrawals as taxable income, but that's not always the case.
Small quibble: if you have any future tax years that are in a lower bracket than what you're in right now, then a traditional 401k is probably better. You can accelerate taxation into the current tax year via a Roth conversion, which means that if you spend a gap year without taxable income, that's a bunch of room for making a Roth conversion.